A large part of the rise in U.S. wage inequality over recent decades comes from a widening gap between professional/managerial (PM) and other occupations (NPM). We examine the trend in this gap from 1980 to 2019 highlighting the role of graduate degrees. Using a decomposition-of-change technique, we show that the increased gap between NPM and PM in the proportion of their workers with graduate degrees explains approximately 20% of the growth in the wage premium for having a PM occupation. We find that wage returns rose modestly for having a BA/BS degree and dramatically for having a graduate degree. Regarding effects of education on holding a PM job, returns to having a BA/BS went down while returns to having a graduate degree stayed high. We discuss how our findings fit predictions from economists’ model of skill-biased technological change, a broader perspective positing the growth of the knowledge economy, and a sociological theory positing increasing Credentialism.